Royalty rate assessment
The 'Present Value' method of capitalizing flows

Year -->
1
2
3
4
5
Sales
700
900
1200
1600
2200
OPR
75
105
130
200
280
Royalty
60
36
48
64
88
Discount Factor,10%
0.9091
0.8264
0.7531
0.6830
0.6209
Discounted OPR
68.2
86.8
97.7
136.6
173.9
Discounted R
54.5
29.8
36.1
43.7
54.6

Question: What is the 'Present Value' for two years at the 10% rate?
Answer: $0.8264 is the PV for two years at the 10% rate.